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Exactly six months ago today I wrote a post on how UBS’s write-down of $3.4 billion was going to be child’s play compared to what was to be ahead of us. I wrote how even though the experts were applauding UBS for being “conservative” in their mark-to-market write-downs to “purge” the market of the bad loans at the expense of short-term profit. I wrote how the experts were full of crap.
From that original post:
An interesting point here is that these banks and financial institutions are taking their own write downs on assets that are not being sold. This means that they can give them whatever value they feel is reasonable (based on today’s market sale price and some highly technical analysis). UBS takes a large write down for being “conservative” about the value; but the true value of these underlying assets both short and long term is murky at best. As our friend Keith likes to say their value isn’t truly known until they are “Marked to Market“. Even using today’s sale prices of these assets it is impossible to get a bead on future value because the performance of the underlying collateral (the mortgages) has been poor and continues to worsen. Until these assets are sold there is no way to get an accurate assessment of their true worth.
Today, UBS announces an additional $19 billion in write-downs. That’s 6 times the initial “conservative” write-down that they were applauded for 6 months ago.
Let’s make this an instructive example of how much faith we should place in the bets of “experts” who call for the bottom every time a “major” event takes place. Let’s make this an example of the fact that no one knows where we stand right now. Whether we’re closer to the bottom or the top - we simply do not know. So all the downers like me and the pumpers like the NAR should simply acknowledge what is evident today: we don’t know when it will end or where, we simply know that for-a-fact things are not currently getting better, and there is zero reason that opinion should change for the immediate term.
From Market Watch on UBS’s further write-downs:
Swiss banking giant UBS on Tuesday revealed a further $19 billion hit from the credit crisis, doubling its write-downs so far, and said it will have to issue around 15 billion Swiss francs ($15.1 billion) in new shares to shore up its capital base.The latest hit means UBS will report a net loss of around 12 billion francs for the first quarter and marks the end of the road for beleaguered Chairman Marcel Ospel, who will step down later in April.
